Last Friday, the Dutch Supreme Court ruled that a traditional allocation role is not required for a temporary employment contract within the meaning of Section 690 of Book 7 of the Dutch Civil Code.

Allocation role

The law describes the temporary employment contract as an employment contract under which the employee, in the context of the employer's profession or business, is made available to another person/organization in order to perform work under their supervision. The Supreme Court has ruled that this description does not include that it must concern the matching of supply and demand for temporary work – also referred to as allocation role – for example in the case of illness or to offset peak workloads.

Consequences for payroll companies The judgment of the Supreme Court means that payroll companies are also included in the definition of Section 690 of Book 7 of the Dutch Civil Code. Even though they do not match the supply and demand of work, they do make workers available to third parties in a commercial capacity. Until now, case law and literature had different views on the question as to whether payroll companies were also included in the definition of a temporary employment agency.

Mitigated regime always applicable? Being a temporary employment agency has benefits and drawbacks. The fact that temporary employment agencies are (nearly) always covered by the ABU collective bargaining agreement and the mandatory pension fund of STIPP and that they are classified in the (expensive) sector 52 with respect to employer contributions are by some organizations regarded as a drawback. A benefit for temporary employment agencies is that they are covered by the “mitigated” regime of Section 691 of Book 7 of the Dutch Civil Code. After all, Section 691 of Book 7 of the Dutch Civil Code applies to the temporary employment contract. That means that the provisions on succession of fixed-term employment contracts do not immediately apply and that dismissal is simpler in certain cases. However, what is remarkable now is that the Supreme Court says that the court has the option to determine that a temporary employment agency may not apply the mitigated regime of Section 691 of Book 7 of the Dutch Civil Code after all. In other words: some temporary employment agencies do have the burdens but not the benefits. Jurisprudence will have to show how this will work out in the future.

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